IFAD to Provide USD 22 Million for Microfinance Programme Worth USD 134 Million in the Republic of India

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IFAD to Provide USD 22 Million for Microfinance Programme Worth USD 134 Million in the Republic of India

Press release number: IFAD 10/02

Rome, 18 February 2002 – A USD 134 million programme in the Republic of India, the “National Microfinance Support Programme” will receive a USD 22 million loan from the International Fund for Agricultural Development (IFAD). A loan agreement was signed today at the Fund’s Headquarters by Dr. Adarsh Kishore, Additional Secretary, DEA, Ministry of Finance, Government of India, Mr. P. B. Nimbalkar, Chairman and Managing Director, Small Industries Development Bank of India (SIDBI) and Mr. Lennart Båge, President of the Fund.

Realising that the microfinance is an important tool for empowerment, sustainable social and economic progress and a key strategy for poverty alleviation, the Government of India has made concerted efforts over the last three decades, to provide financial services to the poor through formal financial institutions (FFIs). Several other projects of IFAD in the country also contributed to its development. Despite efforts, microfinance has yet to grow to a significant scale in India. There is a high demand for microfinance services and to meet this demand the ‘National Microfinance Support Programme’ proposes a two-pronged strategy: firstly the microfinance institutions will be strengthened and linked with the formal financial institutions and secondly, the microfinance programmes of the FFIs will be strengthened.

The ‘National Microfinance Support Programme’s’ target group is mainly the poor in rural and urban areas needing microfinance services. IFAD funds will be restricted to rural and semi-rural areas. About 1.26 million women and men are expected to benefit from this programme, 70% of whom are women and 80% poor. Over 540 000 households are expected to borrow under the programme. An additional activity would be the self-help groups (SHGs) recycling the savings among themselves as loans.

This loan will be channelled by the Fund directly to SIDBI under the guarantee of the Government of India and will thus provide a long term debt capital to SIDBI which will allow SIDBI to raise much larger amount of resources from the domestic financial market for its microfinance operation.

IFAD’s strategy in India focuses on finding solutions for the poor, building on and deepening the experience gained in past programmes and developing innovative approaches that if proven successful, can serve as replicable models. To this end, the interventions continue to be in the area of microfinance initiatives and women’s empowerment and the development of tribal areas and non-farm enterprises.

This will be the fifteenth project financed by IFAD in India.

IFAD is a specialised agency of the United Nations with the specific mandate of combating hunger and poverty in the most disadvantaged regions of the world. Since 1978 IFAD has financed 603 projects in 115 recipient countries and in the West Bank and Gaza for a total commitment of approximately US$ 7.3 billion in loans and grants. Through these projects, about 250 million rural people have had a chance to move out of poverty. IFAD makes the greater part of its resources available to low-income countries on very favourable terms, with up to 40 years for repayment and including a grace period of up to ten years and a service charge of 0.75% per year.